Fiji : Public debt

Policy challenge—reinvigorating
private sector growth ---------
The current business regulatory environment and political uncertainty
continue to weigh on Fiji’s growth prospects. Barriers to h...
igher growth
include limited fiscal flexibility under current debt levels, challenging
business and political environments, and a longstanding need for
structural reform, particularly in the sugar sector.
The budget deficit could be larger than expected if economic growth
below the government assumption of 2.7% reduces government revenues.
Planned sales of government real estate to the Fiji National Provident
Fund (FNPF) help finance the government’s projected deficit. A larger
deficit could prompt the expanded use of FNPF resources to finance it,
which could raise concerns about the fund’s long-term sustainability.
Public debt is relatively high at 50.4% of GDP, about three-quarters of it in
the form of government bond purchases by the FNPF (Figure 3.32.6).
Despite significant investment in recent years, the outlook for Fiji’s
sugar industry remains uncertain. The government’s planned purchase
of equipment to mechanize production and improve its efficiency may
be insufficient to overcome the challenges the industry faces trying to
compete internationally. Sugar production and its supply chain need deeper
structural adjustment, the list of needs headlined by land tenure reform and
an improved business environment. Such reforms would help revive the
sugar industry and stimulate broader private sector development.
While new investments and signs of greater interest from investors
are encouraging, the political situation will affect how much new
foreign investment is realized. The process leading up to national
elections scheduled in 2014 and the credibility of election results will
be important determinants of Fiji’s future economic performance. If a
new democratically elected government is installed in a process that is
acceptable domestically and internationally, renewed business confidence
and development partner reengagement should follow. This would help
harness the country’s rich resource base and its natural position as a
regional hub for the Pacific, shifting Fiji onto a higher growth path.
Source: Fiji Ministry of Finance.
Economic and Fiscal Update:
Supplement to the 2013 Budget Address ( http://www.fiji.gov.fj/index.php?option=com_content&view=article&id=130:ministry-of-finance-strategic-planning-national-dev-a-statistics&catid=76:department&Itemid=171)